reassuring action today

The action of the market was reassuring today.  We spent the morning falling aggressively, and the most of the latter part of the day reversing that down move and closed with a slight gain.  This action was VERY constructive and a good start to a new rally attempt.

Tomorrow and the next few days if we can continue this strength ... I might just change my previous negative bias. 

One day's strength does not make a trend change, but certainly this is one of the first days I have seen some real interest in buying.  Volume was decent in the general markets, not great, but encouraging. 

Too early to decide if we go up from here, but I certainly am more much less bearish today than yesterday.  Caution is still very much warranted at this point.

no difference of opinion

The market started the day nicely climbing in the first few hours ... with the SP500 up almost 1% at one point, but by the close of day all the gains were stripped away and we close the day flat.

Volume on the climb up was again ... lacking. 

So far my analysis has definitely not changed over the past few days, the bulls seem to show little interest in driving this market higher.

The latest rally attempt is continuing to look like a bounce and not a rally.  That is ... a bounce to eventually be undercut once the shorts get aggressive again.

Protect your capital, it is looking like we have another leg down coming soon.

Not a very convincing stock market rally today

Although today was a REALLY nice percentage rally in the markets, I left with a foul taste in my mouth.  Definitely very little conviction in the buying.  The volume is just not there.  Obviously stock market movement is based on supply and demand; the market can move up (short term) because there are lots of buyers OR because there are no sellers.  Over the long term though, there must be continual buyers in order to truly move the market up.  Looking at today's action ... the selling stopped (which is good), but the buying hasn't started in force either. 

With that said, it isn't surprising after such a hard decline over the past few weeks that investors are going to be gun shy for a few days, but if we don't have a stronger push up over the next 3 - 4 days, I would suggest selling further before the decline starts again.

As I have been saying over the past week, we are definitely over due for a rally, but I expected it to be short lived, today's story seemed to verify that analysis.

Buying could start and therefore we certainly could change to a bullish perspective, but all in all, I was hoping for more than what we got to.
 
A large price move says a lot, but without volume behind it ... it signifies that the big guys are sitting on the sidelines, and the big guys move the market no two ways about it...

I definitely left the day with a sour taste in my mouth ...

things look broken in the stock market

The market looks very broken.  For the past four days, we have had strong openings following by a weak closing.  This generally equates to bargain hunters seeing a good deal overnight, then at a certain price point large sellers are coming in to unload more of their shares.

A healthy market generally will do the opposite, open down and then close at or near the high of the day.  The big players generally wait until the end of the day to gauge the action of the market in order to put on larger plays.  As a result, end of day action is more important to analyze than the first part of the day.

One could argue that the morning bullish action shows that clearly there is interest in making this market go higher, but this constant eroding is eventually going to wear out the bulls and show them that more downside is coming.

I keep waiting for a solid bounce to occur, but with every passing day of poor performance ... it is starting to look like we need to drop a ways further before a decent bounce could occur.

Looking at the thirty minute chart, we see the the market is really struggling to spend any time above the 50 period moving average.  almost every day it gathers the strength to touch it and even spen a few hours above it, but it never holds long enough (overnight) to show any confidence in the buyers.

Definitely best to be out of this market until a respectable bounce occurs.  At which time gauging the strength and follow through of the bounce will help us to identify if there is any justification to get back in the market.

a wait and see market

Friday's close was a classic example of what I have been seeing and preaching for about a week now.  This is a 'wait and see' market.  The bulls are not willing to assert themselves, and the bears although more aggressive than the bulls, are also not sticking their necks out very far as well.

Certainly we have a bearish hue ... but right now it is better to just be out of the market and wait to see which side asserts itself.  It is just too risky to be on either side (unless you are a very short term trader).  For the intermediate to longer term traders ... we need to let one of the sides gain an advantage before the reward / risk ratio makes sense.

With that said, if my life depended on placing a wager right now as to which way the market will be going ... it certainly looks to be that we have more downside and although I was hoping for a bounce ... it seems like the market isn't interested in that right now.  But, again ... the signs are just not obvious enough to take any risk right now.

As most of you know, I have been slowly moving to a cash position over the past month, and although I am still slightly invested (on the long side), I have adjusted my stops to be tight and fully expect those positions to be stopped in the coming week.  I have no issue with sitting in cash while the market gains clarity. 

Let the bulls and bears duke it out without having to feel the pain they are feeling...

subtle clues to detect if a change in trend is coming ...

Today was relatively quiet with slow, boring price movements (which I like to see).  With that said, the movement was generally bearish in nature.  We opened up nicely and more or less spent the rest of the day falling.  We did hold nicely above the low from yesterday, but the lack of volume on the upside shows little bullish conviction.  It is understandable that investors are cautious to enter the market, but if the bulls don't take the ball quickly ... the bears will, and we can expect another down leg.

As I mentioned yesterday, I was hopeful we would get a bounce today and move up to test the 50 day moving average, but today's action gives me little confidence in this scenario.  Bulls need to act tomorrow.

SPY 30 minute chart - showing moving average resistance and volume flaws

For today's technical analysis 'lesson', I pulled up the 30 minute SPY chart to try and get a gauge of the market in the short term.